Inside InventionLand

George Davison peddles hope to inventors who are down on their luck. Who's he really helping?

From the outside the headquarters of Davison Design & Development looks like most other warehouses in northern Pittsburgh. Follow founder George Davison III inside, though, and, as he pushes a button, a bookshelf in a large showroom slides open to reveal not a Bat Cave, but 60,000 square feet of fantasyland. There, 230 employees work among a castle, a pirate ship and a tree house, as well as other childlike sets. Davison, trim and energetic at 42, has spent 17 years building an enterprise that, in essence, peddles hope to inventors. For a fee, his company will build a prototype and shop it around. If a corporation bites, Davison shares royalties with inventors. Last year, he says, his shop netted $2 million on $25 million in revenue. A sign above the entrance reads: "InventionLand. Dreams are Possible Here."

So, apparently, are nightmares. In March a federal district judge in western Pennsylvania--responding to a 1997 suit against the company by the Federal Trade Commission--ordered that $26 million be repaid to inventors. These victims, he says, were misled by Davison Design's bogus claims--including false representations about how selective the company was in choosing inventions to work with, making misleading promises of close contact with manufacturers and a deceptive claim that the company's revenue came from sharing royalties with inventors, rather than from the $800 to $12,000 in fees it charged inventors.

Davison Design appealed and in July won a stay on the fine from the appeals court. The company filed its brief with the appellate court in early October, but Davison says there may be a settlement hearing. A lawyer for the FTC says it will file its brief in November.

The way George Davison tells it, his company gets some 55,000 calls a month from inventors around the U.S. looking for help to turn their ideas into marketable products. Most, he says, find him either on the Web (via ads on
Google
) or in the classified sections of Popular Science, Popular Mechanics, American Baby and Field & Stream. Inventors pay $800 to see if their ideas conflict with existing patents and whether there's a potential market. If an invention passes those hurdles, Davison Design charges $10,000 or more to create a prototype of the product.

That takes time. To make a gadget called the Can Pump N' Pour, a circular hard plastic ring with a rubber cover that keeps the fizz in opened soda cans, Davison engineers went through 30 different versions with its own moldmaking machines before getting the shape right. For BikeBoard, a cross between a skateboard (in the rear) and a bike (a tire in front), the R&D group used a plasma cutting machine on the metal, and tube-bending and welding machines to fashion the curves. Once the prototype is done, the company searches for a corporate licensee, then keeps 10% to 20% of royalties, if they occur. According to Davison, he licenses a product every three days, on top of spitting out 200 prototypes a month.

Successes? In the showroom next to InventionLand, Davison shows off some items that have been licensed. There's a Victorinox Swiss Army knife with a built-in warning whistle; a plastic Magna Jar with a magnet built into the lid, for storing nails and screws; and a rubber Oil Filter Gripper that acts as a potholder for someone removing a hot filter from a car engine.

Not one has been a blockbuster, although Davison says
Home Depot
is doing a private-label version of the Magna Jar. By law--the American Inventors Protection Act of 1999--the company Web site must disclose its batting average. In this case 37,000 or so people have contracted Davison Design's services in the last five years; but only eight of those who have signed up have realized royalties exceeding their fees to Davison. If those odds aren't discouraging enough, consider this from a document the Pennsylvania federal judge ordered sent to inventors: As of late October, only 0.001% of Davison's revenue was derived from royalties paid on licensed products. Assuming the company doesn't have trouble with decimal points, the royalty business provides Davison $250 a year in sales. (It's probably closer to $25,000.)

The $4 Can Pump N' Pour can be had on Organize.com as well as at Linens 'n Things and some grocery stores. You can buy the BikeBoard ($70 and up) in sporting goods chains and FAO Schwarz. But as for getting rich quick--or even slow? The bike's inventor, John Iavarone, acknowledges he has made "some money," but not millions of dollars. "I'm satisfied," he says. "Just to see your product on the shelves is enough." Iavarone cut a separate deal with a manufacturer in China, and is now trying to sell his company.

Other Davison customers are far from satisfied. Kam J. Henson, a pharmaceutical salesman from Boise, Idaho, came up with the Shoe-Vine--a string of detachable shoe trees that can be hung over a door or mounted on a closet wall--and says he paid Davison Design $8,000 in 2003 to create a prototype. Davison told him he would target Richards Homewares of Portland, Ore., which makes storage products. Henson claims he was told not to contact Richards directly. "It was a pretty good sales pitch," says Henson. "I mean, I'm in sales."

A Davison employee later told Henson that Richards wasn't interested. But he asked for several hundred dollars more--as a "repackaging" fee--to target another manufacturer. Henson sent the money but became suspicious when the
UPS
tracking slip said the prototype weighed less than one pound. He didn't think the product sample could be so light. Henson ended up calling Richards Homewares and talking to the company president, Robert Freelander, who assured him he had never received a prototype. Henson repeatedly called Davison Design, asking it to send back his prototype, but he says no one returned his calls. "I got totally screwed," he says. After FORBES questioned Davison Design about it, the company sent him a prototype (it weighed more than a pound); Henson says it doesn't work.

Davison explains that he never promises a hit with manufacturers: "We're going to be in the 1% area" when it comes to successful inventions, he says.

Mark Nickerson isn't happy, either. The Garner, N.C. owner of a home-improvement business plunked down roughly $9,000 for a prototype of his invention--Color Link, a desktop keyboard that illuminates the keys in four different colors to help folks learn to type. He was told the idea would be pitched to Spec Research, a City of Industry, Calif. maker of PC peripherals. Nickerson says that after he gave the go-ahead, Davison Design decided to target an outfit called Arista Enterprises, a Hauppauge, N.Y. maker of audio products like cable connectors--but not keyboards. Arista declined to license Color Link. Then, says Nickerson, Davison Design asked him for more money to chase another company, which someone at Davison told him they had targeted 76 times with zero results. "No way, I'm not sending you another dime," Nickerson recalls telling the Davison employee.

Nickerson says he called Arista and found out his keyboard had been sent in a
FedEx
box that hadn't been opened. "This guy Al at Arista told me my presentation was on a spreadsheet with a bunch of other stuff. I was under the impression this was going to be handled with kid gloves," says Nickerson, who once entertained hopes that he could make a few million dollars off his keyboard.

Plenty of other folks have complained about the company on the Web site RipoffReport.com. George Davison insists he's trying to resolve the problems. In a letter sent to the site he offers a full or partial refund to unhappy clients--if he deems the complaints have merit. The offer may make a few people whole. But it won't change the long odds for most would-be Thomas Edisons.

I'm a San Francisco-based Assistant Managing Editor with a focus on wealth. I edit mostly, but also write about how the richest get wealthy and how they spend their time and their money. My colleague Luisa Kroll at Forbes in New York and I oversee the massive reporting effor...